*Pages 1--5 from Microsoft Word - 11414.doc* Federal Communications Commission FCC 01- 254 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of AT& T Communications, Inc. Apparent Liability for Forfeiture ) ) ) ) ) ) ) ) ) File No. EB- 00- TC- 006 NAL/ Acct. No 200132170015 ORDER ON RECONSIDERATION Adopted: September 5, 2001 Released: September 11, 2001 By the Commission: I. INTRODUCTION 1. In this Order, we deny a Petition for Limited Reconsideration (“ Petition”) filed by AT& T Communications, Inc. (“ AT& T”). AT& T requests that the Commission review its April 17, 2001 Order of Forfeiture 1 against AT& T for willful or repeated violations of section 258 of the Communications Act of 1934, as amended (“ the Act”), 2 and our related rules and orders. In the Forfeiture Order, the Commission assessed a forfeiture of $520,000 against AT& T for changing the preferred carriers for 11 telephone lines without the consumers’ authorization, a practice commonly referred to as “slamming.” II. BACKGROUND 2. Following an investigation, the Commission issued a Notice of Apparent Liability for Forfeiture (“ NAL”) against AT& T concerning allegations that the company had slammed 12 consumers (14 telephone lines). 3 Each of the 12 complainants contended that AT& T converted his or her preferred carrier without authorization and provided sworn statements and evidence to that effect. The Commission found that AT& T was apparently liable for a proposed forfeiture of $40,000 for each of 12 violations and $80,000 for each of 2 violations, resulting in a total proposed forfeiture of $640,000. 4 AT& T filed a response contesting the Commission’s findings of apparent liability under section 258, as well as the amount of the proposed forfeiture. 5 In the Forfeiture Order, the Commission rejected most of AT& T’s arguments, but found AT& T not to be liable for three violations and reduced the amount of the forfeiture 1 AT& T Communications, Inc., Order of Forfeiture, 16 FCC Rcd 8907 (2001) (Forfeiture Order). 2 47 U. S. C. § 258. 3 AT& T Communications, Inc., Notice of Apparent Liability, 16 FCC Rcd 438 (2001) (AT& T NAL). 4 AT& T NAL, 16 FCC Rcd 438 at ¶1. The Commission has authority pursuant to section 503( b) of the Act, 47 U. S. C. § 503( b), to assess a forfeiture penalty against a common carrier if the Commission determines that the carrier has “willfully or repeatedly” failed to comply with the provisions of the Act or with any rule, regulation, or order issued by the Commission. 5 AT& T Communications, Inc., Opposition to Notice of Apparent Liability, File No. EB- TC- 006 (filed Jan. 22, 2001) (NAL Opposition). 1 Federal Communications Commission FCC 01- 254 2 by $120,000 accordingly. 6 3. On May 17, 2001, AT& T filed its Petition with the Commission. In the Petition, AT& T requests that the Commission rescind that portion of the Forfeiture Order finding which held AT& T liable for a forfeiture of $40,000 each ($ 80,000 total) for changing the preferred carriers of two consumers (Ortega and Patterson) in reliance on the alleged authorization of persons other than the subscribers. 7 AT& T argues that a forfeiture is unwarranted with respect to the Ortega and Patterson complaints because the undisputed record shows that AT& T complied fully with the Commission’s prescribed procedures for conducting independent third party verification of these carrier change orders. 8 AT& T further argues that the Forfeiture Order is inequitable and unjustified as a matter of sound regulatory policy because it places carriers such as AT& T at risk for forfeiture despite the apparent authority of persons with whom AT& T or its agents conduct verification transactions. 9 III. DISCUSSION A. AT& T Did Not Comply With the Commission’s Rules. 4. AT& T argues that it was improper for the Commission to assess a forfeiture with regard to the Ortega and Patterson complaints because the Forfeiture Order failed to make any contrary findings to AT& T’s showing that it complied with the Commission’s verification procedures. 10 According to AT& T, it is undisputed in the record 11 that (1) AT& T made outbound telemarketing calls to Ortega and Patterson; 2) the person who answered each subscriber’s telephone authorized a change in service to AT& T; (3) its verification scripts require the agent to ask whether the individual with whom the agent is speaking is responsible for telecommunications service at the called number; 12 (4) a qualified independent third party verifier verified each carrier change order with the individual at the customer’s location; and (5) the verifier obtained the date of birth of each person as the identifying information. 5. Our rules require that a carrier obtain authorization from the subscriber prior to making a preferred carrier change. 13 AT& T admits that the persons from whom AT& T obtained its alleged authorization were not, in fact, authorized to confirm those carrier changes. 14 Our slamming rules impose a strict liability standard and the test is whether the carrier obtained the subscriber’s authorization and verification of that authorization before submitting or executing a carrier change order. 15 AT& T failed 6 Forfeiture Order, 16 FCC Rcd 8907 at ¶¶ 16- 17 7 See Petition at 1- 2. 8 See Petition at 1- 2. 9 See Petition at 1- 2. 10 Petition at 4- 5. 11 In the Forfeiture Order, the Commission did not attempt to reach any conclusion regarding the veracity of each step AT& T claims it took in its authorization and verification processes. See NAL Opposition at 17- 18. See also Petition at 4- 5 (describing the steps in AT& T’s authorization and verification processes. 12 See Declaration of Rebecca Yung- Eng, Exhibit D4, Letter from Peter Jacoby, General Attorney, AT& T to Catherine Seidel, Chief, Telecommunications Consumer’s Division, FCC dated August 16, 2000. AT& T provided no scripts, nor did it provide tapes of these verification calls. 13 See 47 C. F. R. § 64. 1120( a)( 1)( i). 14 See NAL Opposition at 17. 15 See Implementation of the Subscriber Carrier Selection Changes Provision of the Telecommunications Act of 1996 and Policies and Rules Concerning Unauthorized Changes of Consumers’ Long Distance Carriers, CC Docket No. 94- 129, Second Report and Order and Further Notice of Proposed Rulemaking, 14 FCC Rcd 1508, 1541 (1998) (Second Report and Order and FNPRM). 2 Federal Communications Commission FCC 01- 254 3 this test because the undisputed evidence shows that both Ortega and Patterson had their long distance service switched to AT& T without their authorization. The record indicates that someone named Dwight Lewis (Lewis) requested a change in Ortega’s service and that one Sam Carillo (Carillo) requested a change in Patterson’s service. Mr. and Mrs. Ortega state under oath that they do not know anyone named Dwight Lewis. Similarly, Mr. Patterson attests that he does not know anyone named Sam Carillo. Given these facts, it is far from clear that AT& T’s records are correct. In any event, it is incumbent upon AT& T to ensure that its procedures elicit enough information to determine that they are speaking with and obtaining authorization from the subscriber. 6. AT& T insists that it believed in good faith, albeit mistakenly, that those carrier selections had been authorized by persons with a right to effectuate those changes, and it obtained and verified the selections in accordance with the Commission’s rules. 16 AT& T argues that the Forfeiture Order made no finding that AT& T knew or had reason to know that the individuals with whom it conducted the authorization and verification transactions were in fact unauthorized to place the carrier change orders. 17 This argument fails because neither sections 258 or 503( b) of the Act nor our rules require us to find that a carrier had specific intent to violate our rules. The Commission has specifically determined to hold carriers liable for both inadvertent and intentional unauthorized changes to subscribers' preferred carriers, finding that doing so will reduce overall incidence of slamming and is consistent with section 258. 18 Accordingly, even assuming that AT& T was acting in good faith, section 258 and our rules hold carriers liable for slamming regardless of whether the unauthorized preferred carrier change was intentional or inadvertent. B. The Commission’s Forfeiture is Fully Justified As a Matter of Policy. 7. AT& T argues that the Commission inappropriately assessed a forfeiture despite Lewis and Carillo’s “apparent authority” to make a preferred carrier change. 19 AT& T further argues that the forfeiture is unwarranted because of the Commission’s own recent effort, in the Third Report and Order 20 on slamming, to prescribe criteria for determining whether an individual is authorized to act on behalf of a subscriber to make a carrier selection for that account. 21 We reject these arguments. As AT& T acknowledges, the rules adopted in the Third Report and Order were not in effect at the time of the events underlying the forfeiture in this case. 22 Therefore, they do not apply to the facts of this case. 8. AT& T next argues that the forfeiture is unwarranted because AT& T properly obtained the authorization to switch the complainants’ preferred carrier from a person having “apparent authority.” 23 In support of its argument, AT& T points out that the Commission stated in the Second Report and Order and FNPRM that “it is unclear how a marketing carrier would know if the person who has authorized a carrier change is in fact authorized to order telecommunications services.” 24 But AT& T 16 See NAL Opposition at 20. 17 Petition at 5. 18 See Second Report and Order and FNPRM, 14 FCC Rcd 1508 at 1541. 19 Petition at 8. 20 See Implementation of the Subscriber Carrier Selection Changes Provisions of the Telecommunications Act of 1996; Policies and Rules Concerning Unauthorized Changes of Consumers Long Distance Carriers, Third Report and Order, 15 FCC Rcd 15996 (2000) (Third Report and Order). 21 Petition at 8. 22 See Petition at 9- 10. 23 See Petition at 1, 5. 24 NAL Opposition at 19 (quoting Second Report and Order and FNPRM, 14 FCC Rcd 1508 at ¶ 177). 3 Federal Communications Commission FCC 01- 254 4 fails to mention that the Commission’s concern was that adoption of a proposal allowing more than one person in a household to authorize preferred carrier changes could lead to an increase in slamming, because a slamming carrier could simply submit changes requested by unauthorized persons and claim that it thought that these persons were authorized. 25 Given the very real possibility that this precise scenario occurred in the instant case, the statement in the NPRM provides no support for AT& T’s argument. 26 9. Finally, AT& T argues that the Forfeiture Order provides no reasonable steps that AT& T could have taken to determine whether Dwight Lewis and Sam Carillo were in fact authorized to change the preferred carrier for Ortega and Patterson, respectively. 27 AT& T’s argument misses the point. As noted above, AT& T is strictly liable for any unauthorized preferred carrier changes it submits to the LEC, and ultimately must determine for itself how to ensure that no unauthorized changes occur. Should AT& T’s methods prove unsuccessful, the company is liable for any resulting unauthorized changes. 28 10. After reviewing all the information filed by AT& T in its Petition, we find that AT& T has failed to identify facts or circumstances to persuade us that we should rescind in part the Forfeiture Order, or that a further reduction of the forfeiture amount is warranted. IV. ORDERING CLAUSES 11. Accordingly, for all the reasons stated above, IT IS ORDERED, pursuant to section 405 of the Communications Act, as amended, 47 U. S. C. § 405, and section 1.106 of the Commission’s rules, 47 C. F. R. § 1. 106, that the Petition for Limited Reconsideration filed by AT& T Communications, Inc. IS DENIED. 12. IT IS FURTHER ORDERED pursuant to section 503( b) of the Act, 47 U. S. C. § 503( b), and section 1. 80( f)( 4) of the Commission’s rules, 47 C. F. R. § 1. 80( f)( 4), that AT& T Communications, Inc. SHALL FORFEIT to the United States Government the sum of five hundred and twenty thousand ($ 520,000) for violating section 258 of the Act, 47 U. S. C. § 258. 13. IT IS FURTHER ORDERED that a copy of this Order On Reconsideration shall be sent by certified United States mail to AT& T Communications, Inc., 295 North Maple Avenue, Basking Ridge, New Jersey, 07920. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary 25 See Second Report and Order and FNPRM, 14 FCC Rcd 1508 at ¶ 177. 26 We also note that this statement was made in the context of a notice of proposed rulemaking (“ NPRM”). The purpose of an NPRM is not to promulgate rules or state policy, but to stimulate comments and debate to aid in the rulemaking process. See Radio- Television News Directors Association v. FCC, 184 F. 3d 872, 886 at note 16 (D. C. Circ. 1999) citing Commodity Futures Trading Comm’n v. Schor, 478 U. S. 833, 845 (1986) (stating that the NPRM does not bind the FCC, which is free to adopt a contrary position after consideration of public comments). 27 See Petition at 6. 28 Although the rules promulgated in the Third Report and Order do not apply to this case, they are currently in effect. In that order, the Commission suggests how a carrier may determine whether it is speaking with an individual authorized to make choices for the account at issue. There is no indication, however, that merely asking one of those questions is sufficient to ensure that the carrier is speaking with an individual who is authorized to make a carrier change. See Third Report and Order, 15 FCC Rcd 15996 at ¶51, note 154. 4 Federal Communications Commission FCC 01- 254 5 5